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Full text of "Economic Conditions Causing the Two-Day Cattle Market at Chicago and the Effect of the Zoning Law"

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ECONOMIC CONDITIONS CAUSING THE TWO-DAY CATTLE 

MARKET AT CHICAGO AND THE EFFECT OF 

THE ZONING LAW. 

R. H. Wilcox, 

Farm Management and Farm Economics, Washington, D. C. 

It is now approximately three and one half years since the Food 
Administration put into effect its zoning order "to establish greater 
regularity for the movement of live-stock shipments and arrivals at 
Chicago." By the original order, issued on December 10, 191 7, all 
live-stock producing territory tributary to the Union Stock Yards was 
divided into two zones ; the first to include, roughly speaking, territory 
lying within 175 miles of the yards ; the second zone taking in all terri- 
tory lying outside the first-zone boundary up to and including shipping 
points within the thirty-six-hour scheduled runs covering live freight 
directed toward Chicago. The order was made so that shippers within 
the first zone could load live stock to arrive at Chicago for Tuesday, 
Thursday, Friday and Saturday markets, while those in the second 
zone could only load to arrive at the yards on Monday, Wednesday, 
Friday and Saturday. Although this original order has not yet been 
revoked, it has been revised and modified from time to time until now, 
in the instance of a few of the smaller roads supplying Chicago with 
live stock, it has ceased to function. However, most of the roads 
touched by this order are attempting, in so far as they are able, to 
comply with the system. 

Just what were the conditions on the Chicago market prior to the 
time this zoning went into effect? In the year 1916 over seventy-five 
percent of the cattle business in this great market was turned on two 
days of the week, or approximately 375 millions of the 509 million 
dollars' worth of live-stock tickets changed hands on Mondays and 
Wednesdays. Now, the transaction of the remaining 125 million dol- 
lars' worth of business during the rest of the week was of no small 
moment ; but surely there should be found reasonable cause for a prac- 
tice which in 1916 drove three times as many cattle over the Chicago 
scales on Monday and Wednesday as crossed on the four remaining 
" light days " of the week. And I think as we go into the conditions 
surrounding the marketing of cattle just before the war we will find 
that this practice grew out of the adjustments of those agencies con- 

176 



WILCOX : CHICAGO TWO-DAY CATTLE MARKET. 1 77 

nected with the marketing of live stock to the natural forces at work 
in the cattle industry during the rapid growth of centralized markets 
since 1885. Let us go back and touch briefly the history of the estab- 
lishment and development of live-stock markets and carry this history 
down to the year 1916, dwelling upon some of the natural and economic 
causes which resulted in the congestion of the Chicago cattle market 
on Mondays and Wednesdays. 

Forces Causing Two-Day Market. 

Prior to the 8o's, that period in our marketing development marked 
by the rapid expansion in the use of the refrigerator car, Chicago's 
chief functions lay in furnishing feed and water to the producer who 
was speculative enough to chance his year's work and worry to the 
cattle car between the Chicago yards and the killing sheds of the 
Atlantic coast, and also in supplying a concentration point where cattle 
buyers from the canneries of the New England States could assemble 
and buy thin cattle. In those early times no discrimination, as to days 
of the week, was made by the ranchman for unloading at the Chicago 
chutes, for when it came time to move his cattle toward market the big 
end of his job lay in getting his drove out of the southwestern plains 
and north to the Missouri Valley shipping points, by trailing them for 
hundreds of miles through days and nights fraught with many hard- 
ships and marked by running battles with bands of outlaws. But as 
the railroads gradually extended their trackage to the south and west, 
and with this extension better freight schedules for live stock were 
offered, the cattleman's problems of moving disappeared, and in their 
stead grew the practice of letting cattle go in on the days of " strong " 
demand until the producer came to be blamed by the railroads for 
demanding Chicago service upon Monday and Wednesday and neglect- 
ing to fill schedules upon other days of the week. It was hard for the 
shipper to disregard Monday and Wednesday conditions when he be- 
lieved that his offerings were put into a wider field of competition on 
these days. 

And so we are brought to consider the second great force, uncon- 
sciously operating to maintain a two-day market — the great body of 
buying agencies. On all produce markets and exchanges Monday is 
dubbed the steady to strong day ; why so is probably beyond explana- 
tion. Under normal conditions in market and mercantile circles, Mon- 
day exhibits a freshened start, a possible result of the opportunity 
afforded by Sunday to think things over. Whatever be the explana- 
tion, Monday gradually came to mean a good day to make the yards. 



I78 JOURNAL OF FARM ECONOMICS. 

The feeder was not slow to see this when once the experience was 
realized and Monday found more cattle trying to get into the Chicago 
yards than could be handled effectively. Hence Tuesday began to see 
pens filled with left-overs. The spatterings of hard-looking left-overs 
hurt the Tuesday trade, caused a bearish market all around and taught 
the shippers to leave Tuesday alone. By Wednesday the " old stuff " 
was gone and the packers were busy again, at least in comparison to 
the day before. Tuesday and Thursday gradually lost in favor before 
the activities of Monday and Wednesday. Order buyers, export buy- 
ers, kosher buyers and others learned to wait for Monday and Wednes- 
day. These, early, came to be known as " loading-out " days. Some 
buyers became inactive the rest of the week, reducing the competition 
of the market. Conditions had gradually resulted compelling the 
packers to buy long Monday and Wednesday as advance car reports 
would indicate light receipts for the days following. Packing plants 
must be kept busy, and to assure this packers were heavy buyers on 
the heavy days as a measure of safety. 

While the great body of producers at one end and the fraternity of 
buyers at the other were adjusting themselves to a two-day market, 
the railroads were experiencing the pressure of economic forces which 
they felt justified the two-day runs. All the early centralized stock 
yards were located and fostered by the railroads to fill the increasing 
needs and purposes of a convenient place to bring together and display 
visible and possible future live-stock tonnage. The machinery of the 
live-stock trade was naturally attracted to the market places of the 
railroads, and buyers, traders, speculators and others began to confine 
their operations to centralized points maintained by the railroads until 
there grew to be such a demand for stock at these points that the rail- 
roads were no longer confronted with creating demand, but rather with 
supplying car service for agencies which were now sustaining demand, 
at the same time requiring speedy and efficient service in order to 
exist and carry on business. 

Dead Freight Has Increased Faster than Live Tonnage. 

During the early eighties the railroads had a very difficult job on 
their hands maintaining loading facilities at strategic points along the 
trails from the southwest, practically putting themselves into bank- 
ruptcy in attempting to render cattle-car service with rates to the east 
so much better than their competitors that ranchmen would go out of 
their way to benefit by the service. At the time John B. Sherman 
managed to get the railroads pulling together and started the old Bull's 



WILCOX : CHICAGO TWO-DAY CATTLE MARKET. 179 

Head Market few anticipated Chicago would become the vast railroad 
center it is today. Prior to the nineties Chicago was not a heavy rail 
terminal for the products of the mines, forests and factories which lay 
to the south and west. The cattle car in those days constituted a far 
more important share of her tonnage. Of all tonnage entering Chi- 
cago by rail in 1885 approximately 27 percent was brought in by stock 
cars; today the fifteen principal railway systems supplying Chicago 
with animal shipments carry but 5% percent of their tonnage as live 
freight; the products of mines make up 42 percent, manufacture 20 
percent, farm products, other than live stock, 16 percent, while lumber 
and miscellaneous tonnage makes up the balance. 

The relative decline in live tonnage entering Chicago has not been 
due entirely to the exploitation and development of the resources of 
mines, factories and forests, but has been caused in marked degree by 
the rapid growth of stock yards along the Missouri valley, where a 
barrier of markets has been developed which absorbs a great tonnage 
of live freight that earlier found its way into Chicago. Since 1890 
these markets in the Missouri valley, together with those of the Corn 
Belt States other than Chicago, have increased their receipts four hun- 
dred times. Where previously there existed loading stations for cattle 
bound Chicagoward, today there are maintained a score of packing 
houses which absorb the live tonnage and produce in its stead those 
products which use the refrigerator car in their journey eastward to 
the centers of consumption. 

Chicago in her strategic position at the southern extremity of Lake 
Michigan stands as a sort of flood-gate to catch all streams of com- 
merce in their flow eastward to the principal center of consumption 
and export. Present conditions in eastward traffic show that all paths 
of eastbound freight passing the Mississippi and Great Lakes area con- 
verge at Chicago, save the one route which leads eastward from the 
St. Louis territory. Omaha is fed by one stream of commerce leading 
in from the northwest; Kansas City takes care of three, one leading 
from the same territory as that tapped by Omaha, a second from the 
southwest and a third from Texas. Chicago absorbs the combined 
tonnage of the Kansas City streams after they are assembled into one 
continuous flow, a second from Omaha, a third from the northwest, a 
fourth from New Orleans and a fifth from the eastern Gulf States. 

Expansion of Track Mileage Necessitates Reducing Light 

Hauls. 

Let us leave the markets at this point and go out along the railways 
to observe changes in the amount and distribution of live-stock ton- 



l80 JOURNAL OF FARM ECONOMICS. 

nage. In the twenty-one States touched by the five leading Chicago 
live-stock roads there were, in 1875, only 77,000 miles of steam-road 
trackage over which to operate live-stock schedules ; in 1916 there were 
154,000 miles. While the tonnage of live stock increased in these 
twenty-one States during this time, it did not keep pace with the ex- 
pansion in railroad construction. Taking the animals on farms Jan- 
uary 1 in these twenty-one States at each ten-year period beginning 
with 1875, and considering 20 cattle, 120 sheep and 70 swine as each 
constituting a single deck, and then by distributing the total single 
decks of stock on farms over the miles of steam road in operation there 
is shown to be a decrease from 23.1 decks per mile in 1875 to 17.6 
decks in 191 5, a decrease of 21.8 per cent in the number of decks of 
live stock per mile of railroad. 

January i 1875. 1885. 1895. 1905. 1913. 

Total single decks per mile 23.1 24.8 20.0 21.2 17.6 

Percent of marketed live stock going to 

Chicago 797 60.2 48.5 37.3 29.5 

Number of decks per mile for Chicago to 

draw from 18.4 14.9 9.7 7-9 5-2 

Since 1875 there have been stock yards in these twenty-one States 
that have taken a share of the total decks away from Chicago. In the 
year 1875, in these twenty-one States, 79.7 percent of the live-stock 
tonnage put on cars went to Chicago, while in 191 5 only 29.5 percent 
was marketed there, the rest went into the Missouri valley points and 
other centralized yards in the Corn Belt. That is, of the 17.6 single 
decks of live stock on farms per mile of railroad January 1, 191 5, only 
29.5 percent, or 5.2 decks per mile, were left to supply Chicago. 

The accompanying chart shows that, until other markets in the 
middle west began their rapid growth, Chicago's cattle receipts were 
evenly distributed over the first five days of the week. By 1895 the 
newly developed outside slaughtering centers were receiving more ton- 
nage in the form of live animals than was Chicago. In 1905 Chicago's 
share of all live-stock tonnage received at the eight principal markets 
of the middle west had dropped to about 37 percent, and by 191 5 she 
was receiving but approximately 30 percent. It was during the period 
from 1890 up to the opening of the war that the railroads were in- 
creasing the carrying capacities of both engines and rolling stock to 
cope with the increase in freight traffic. By 191 5, when the cattle car 
made up but a fraction over five percent of Chicago's tonnage, it be- 
came increasingly difficult for the railroads to spread their Chicago 
live freight over the week and still place and hold this traffic within 



WILCOX : CHICAGO TWO-DAY CATTLE MARKET. l8l 

their tonnage system. There was a gradual holding back in making up 
trains for the Chicago divisions until the load volume reached the 
minimum governed by tonnage orders coming from traffic headquar- 
ters. From this practice finally grew the discontinuing of daily live- 
stock schedules over the small branch or " feeder " lines and the ar- 
ranging of these pick-up schedules upon days which would insure neces- 
sary train-load capacity on trunk lines. As the farmers were already 
favoring Monday and Wednesday, it was very natural that schedules 
were arranged so that they could make these markets. 

Zoning of Producing Territory Showing Beneficial Effect. 

It was with the thought of remedying this two-day, heavy- volume 
traffic at the Chicago end of the lines that the Food Administration 
requested the railroads to keep their two-day schedules, but not use the 
same two days over their whole system. Zones were made at the 
Kansas City market by drawing imaginary lines out from the market 
cutting the producing territory into sections. But with the Chicago 
market, as most of her live-stock traffic comes from the west and 
southwest, zoning was thought more workable if it divided the short- 
haul Chicago traffic from the long-haul. The effects of the order were 
at once apparent. Monday's quota the first year was reduced from 
42.4 to 30.0 percent of the weekly receipts, and Wednesday received 
14.0 percent where in 191 5 her share was 33.4 percent. Tuesday's 
share was, on the other hand, increased from 10.0 percent to 22.3, and 
Thursday's and Friday's part were more than doubled. 

While the zoning order reduced the fluctuations in receipts and 
spread them more evenly over the first five days of the week, was it 
influential in reducing price fluctuations? General price movements 
are not caused entirely by fluctuations in supply, but are governed fully 
as much by demand. It is therefore difficult to compare the price 
fluctuations one year with another without knowledge of general price 
movements due to demand. During 1919 the cattle market made three 
general upward and three downward price movements; in 1917, the 
year before zoning had become effective, there was a general upward 
movement until September, and then a gradual decline over the last 
three months of the year. Despite the fact that the price movement 
made more changes in 1919, a careful study of daily prices shows that 
there were fully four to five percent more " steady " days in 1919 than 
in 1917. This would seem to indicate that the distribution of receipts 
throughout the week had a very beneficial effect in reducing daily 
fluctuations in prices. 



l82 JOURNAL OF FARM ECONOMICS. 

And it would seem that the live-stock producer was not slow in 
noticing improvements worked by the new order of things for more 
live tonnage began going toward Chicago. As pointed out above, Chi- 
cago's share of live-stock tonnage received at the eight principal middle- 
western centralized markets had gradually decreased until in 191 5 she 
was receiving but 29.5 percent. In 1918, the first year under the zone 
order, this percentage jumped to 34.3. 

Chicago's Share of Live-Stock Tonnage Marketed at the Eight Principal 

Middle-Western Yards, Shown in Percentages. 

1915. 1916. 1918. 1919. 1920. 

29.5 31.2 34.3 32.1 31.0 

It would appear, however, that Chicago is beginning to drop back 
to where she absorbs about 30 percent of the animal tonnage going to 
market in the middle west. This dropping off is due principally to 
the sharp decline in the winter feeding of stocker animals in the Corn 
Belt during 1919 and 1920, when at the same time lack of moisture 
on the range drove many thousands of cattle and sheep into the Mis- 
souri valley markets. 

Live-stock producers no longer entertain the belief that allotting 
their stock to certain days in the week works a hardship upon them, 
for now no one or two days are better than the others. The railroads 
are finding it difficult to adhere strictly to the order, but they are find- 
ing upon the other hand less delays in unloading at the yards and 
fewer claims to pay. The Chicago market has been relieved of the 
two-day market, fluctuations from day to day have been reduced, and 
Chicago's receipts, if anything, have increased relatively over what 
might have been looked for under the economic conditions influencing 
the fattening of live stock in territory tributary to her yards.